HILL PROPERTIES LTD, MUMBAI V. ITO 5(1)(4), MUMBAI

ITA 6093/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55663 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 17-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 06-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Assessee Lawyers: F V IRANI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER, A ND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 6381/MUM./2010 (ASSESSMENT YEAR : 2007-08 ) INCOME TAX OFFICER WARD-5(1)(4), R.NO.569 AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020 .. APPELLANT V/S M/S. HILL PROPERTIES LTD. HILL PARK ESTATE, A.G. BELL ROAD MALABAR HILL, MUMBAI 400 006 PAN AABCH7578L .... RESPONDENT ITA NO. 6093/MUM./2010 (ASSESSMENT YEAR : 2007-08 ) M/S. HILL PROPERTIES LTD. HILL PARK ESTATE, A.G. BELL ROAD MALABAR HILL, MUMBAI 400 006 PAN AABCH7578L .. APPELLANT V/S INCOME TAX OFFICER WARD-5(1)(4), R.NO.569 AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020 .... RESPONDENT REVENUE BY : MR. V.V. SHASTRI ASSESSEE BY : MR. F.V. IRANI DATE OF HEARING 17.10.2011 DATE OF ORDER 21.10.2011 M/S. HILL PROPERTIES LTD. ITA NO. 6381/MUM./2010 ITA NO. 6093/MUM./2010 2 O R D E R PER J. SUDHAKAR REDDY, A.M. THESE CROSS APPEALS ARE DIRECTED AGAINST THE IMPUG NED ORDER DATED 30 TH JUNE 2010, PASSED BY THE COMMISSIONER (APPEALS)-IX , MUMBAI, FOR ASSESSMENT YEAR 2007-08. 2. BRIEF FACTS, AS BROUGHT OUT IN THE IMPUGNED ORDER P ASSED BY THE COMMISSIONER (APPEALS), VIDE PARA-3.1, IS EXTRACTED BELOW FOR READY REFERENCE:- 3.1. THE RELEVANT FACTS ARE THAT THE APPELLANT IS A COMPANY. IT HAS ACQUIRED PLOT OF LAND AND CONSTRUCTED BUILDINGS AND FLATS IN THESE BUILDINGS HAVE BEEN GIVEN TO SHAREHOLDERS. THE APPE LLANT COMPANY IS RESPONSIBLE FOR THE REPAIR AND MAINTENANCE AND OVER ALL MANAGEMENT OF THE BUILDINGS. IT IS COLLECTING TRANSFER FEE FROM I NTENDING PURCHASERS AT THE TIME OF TRANSFER OF FLAT BY THE SHAREHOLDERS TO THE INTENDING PURCHASERS. IN THE CURRENT YEAR THE APPELLANT COLLE CTED RS.50,81,942/- ON THIS ACCOUNT. THE APPELLANT IS CLAIMING THAT IT IS A MUTUAL CONCERN AND TRANSFER FEE RECEIVED BY IT ARE NOT TAXABLE UND ER THE CONCEPT OF MUTUALITY. IN THE ASSESSMENT ORDER, ASSESSING OFFIC ER HELD THAT THE APPELLANT IS A COMPANY AND IT CAN NOT BE A MUTUAL C ONCERN. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CONCEPT OF MUTUALITY APPLIES ONLY TO COOPERATIVE SOCIETIES AND IT CAN NOT BE EXT ENDED TO COMPANIES WHICH ARE BASICALLY FORMED TO CARRY SOME BUSINESS. THE ASSESSING OFFICER ALSO HELD THAT TRANSFER FEE RECEIVED BY THE APPELLANT IS NOT COVERED BY THE CONCEPT OF MUTUALITY SINCE THE SAME HAS BEEN RECEIVED FROM NON MEMBERS. THE ASSESSING OFFICER FURTHER OBS ERVED THAT THE APPELLANT HAS NOT COLLECTED THE TRANSFER FEE AS PER ITS ARTICLES OF ASSOCIATION. THE ASSESSING OFFICER REJECTED THE CLA IM OF THE APPELLANT FOR EXEMPTION ON THE CONCEPT OF MUTUALITY AND HOLDI NG THE TRANSFER FEE RECEIVED BY THE APPELLANT ARE NOT COVERED BY THE CO NCEPT MUTUALITY. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE FIRST AP PELLATE AUTHORITY, WHEREIN THE COMMISSIONER (APPEALS) GRANTED PART REL IEF. AGGRIEVED, THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFOR E THE TRIBUNAL. M/S. HILL PROPERTIES LTD. ITA NO. 6381/MUM./2010 ITA NO. 6093/MUM./2010 3 4. LEARNED COUNSEL, MR. F.V. IRANI, ON BEHALF OF THE A SSESSEE, FILED A CHART FOR BOTH THE CASES AND SUBMITTED THAT THE ISSUES AR E COVERED BY EARLIER ORDER OF THE TRIBUNAL. ON A QUERY FROM THE BENCH, THE LEA RNED COUNSEL AGREED THAT THE ISSUE OF TAXABILITY OF INTEREST INCOME IN CASE OF MUTUAL CONCERN IS HELD AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE B Y THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S COMMON EFFLUEN T TREATMENT PLANT, (THANE-BELAPUR) ASSOCIATION, [2010] 328 ITR 0362 (B OM.). 5. LEARNED DEPARTMENTAL REPRESENTATIVE, MR. V.V. SHAST RI, ON BEHALF OF THE REVENUE, ADMITTED THAT THE MAIN ISSUES HAVE BEE N ADJUDICATED BY THE TRIBUNAL IN ITS EARLIER ORDER. 6. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD, AS WELL AS THE CASE LAWS CITED BEFORE US, WE HOLD AS FOLLOWS:- 7. WE FIRST TAKE UP REVENUES APPEAL IN ITA NO.6381/MU M./2010. GROUND NO.1, READS AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND AS PER LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE TRANSF ER FEES OF RS.50,82,942/- RECEIVED BY THE ASSESSEE COMPANY, ON TRANSFER OF FLATS AS EXEMPT FROM INCOME TAX, ON PRINCIPLE OF MUTUALIT Y WHICH PRINCIPLE APPLIES ONLY TO COOPERATIVE SOCIETIES AND WOULD NOT APPLY TO CORPORATE ENTITIES. 8. WE FIND THAT THE AFORESAID ISSUE IS COVERED IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF MUMBAI H BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.992/MUM./ 2010, ORDER DATED 20 TH OCTOBER 2010, FOR ASSESSMENT YEAR 2006-07, AS WELL AS IN ITA NO.6223/ MUM./2008 AND 6249/MUM./2009, ORDER DATED 16 TH JULY 2010, FOR ASSESSMENT YEAR 2005-06, ETC., WHEREIN THE TRIBUNAL , WHILE APPLYING THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT RENDE RED IN SIND CO-OPERATIVE HOUSING SOCIETY, INCOME TAX APPEAL NO.1063 OF 2004, HELD THAT TRANSFER FEES RECEIVED BY THE ASSESSEE BEING A MUTUAL CONCERN, WH ETHER FROM OUT COMING M/S. HILL PROPERTIES LTD. ITA NO. 6381/MUM./2010 ITA NO. 6093/MUM./2010 4 OR FOR INCOMING MEMBERS IS NOT LIABLE TO TAX BECAUS E OF PRINCIPLES OF MUTUALITY. THUS, WE DISMISS GROUND NO.1. 9. GROUND NO.2, READS AS FOLLOWS:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE NON REFUNDA BLE SECURITY DEPOSITS OF RS.3,62,500/- RECEIVED BY THE ASSESSEE COMPANY, FOR ALLOWING REPAIRS TO FLATS IS EXEMPT FROM INCOME TAX , ON PRINCIPLE OF MUTUALITY WHICH PRINCIPLE APPLIES ONLY TO CO-OPERAT IVE SOCIETIES AND WOULD NOT APPLY TO CORPORATE ENTITIES. 10. THE AFORESAID ISSUE IS ALSO COVERED AGAINST THE REV ENUE AND IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2005-06 AND 2006-07 CITED SUPRA, W HEREIN THE TRIBUNAL NOTED THAT THE NONREFUNDABLE SECURITY DEPOSIT IS CO LLECTED FROM THE MEMBERS AND, HENCE, THE PRINCIPLES OF MUTUALITY APPLY AND I T CANNOT BE TAXED. KEEPING THIS IN VIEW, GROUND NO.2 IS ALSO DISMISSED. 11. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 12. WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO.6093/MUM ./2010. GROUND NO.1, READS AS FOLLOWS:- 1. THE COMMISSIONER OF INCOME-TAX (APPEALS)-9, MUM BAI CIT(A) ERRED IN UPHOLDING THE ADDITION OF NOMINEE OCCUPANC Y CHARGES OF RS. 9,19,000 RECEIVED FROM MEMBERS, ON THE GROUND THAT THE SAME IS NOT EXEMPT UNDER MUTUALITY. THE APPELLANTS SUBMIT THAT ABOVE NOMINEE OCCUPANCY CHARGES ARE EXEMPT ON THE GROUND OF MUTUALITY AND THEREFORE SHO ULD NOT BE INCLUDED IN THE TOTAL INCOME. THIS ISSUE IS COVERED IN FAVOUR OF THE APPELLANT, INTER ALIA, BY ITAT ORDER FOR AY 2005-06 . 13. THE ISSUE OF TAXABILITY OF NOMINEE OCCUPANCY CHARGE S IS CONSIDERED BY MUMBAI H BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.101/ MUM./2010, ORDER DATED 18 TH MARCH 2011, FOR ASSESSMENT YEAR 2006-07. THE BENCH FOLLOWED ITS OWN ORDER IN EARLIER ASSESSMENT YEARS AND ALSO APPLIED THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT I N MITTAL COURT CO- M/S. HILL PROPERTIES LTD. ITA NO. 6381/MUM./2010 ITA NO. 6093/MUM./2010 5 OPERATIVE SOCIETY V/S ITO, 184 TAXMAN 292 (MUM.) AN D HELD THAT NOMINEE OCCUPATION CHARGES ARE EXEMPT FROM TAXATION ON THE PRINCIPLES OF MUTUALITY. IN VIEW OF THIS DECISION OF THE TRIBUNAL, GROUND NO .1 IS ALLOWED. 14. GROUND NO.2, READS AS FOLLOWS:- 2. THE CIT (A) ERRED IN UPHOLDING THE ADDITION OF I NTEREST INCOME OF RS.13,54,316 [I.E. ON (I) FIXED DEPOSITS WITH BANK (RS 13,46,106) AND (II) BEST DEPOSIT (RS 8,210) ], ON THE GROUND THAT SAME IS NOT EXEMPT UNDER MUTUALITY. THE APPELLANTS SUBMIT THAT ABOVE INTEREST INCOME IS EXEMPT ON THE GROUND OF MUTUALITY AND THEREFORE SHOULD NOT BE INC LUDED IN THE TOTAL INCOME. THIS ISSUE IS COVERED IN FAVOUR OF THE APPE LLANT, INTER ALIA, BY ITAT ORDER FOR AY 2005-06. 15. THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S CO MMON EFFLUENT TREATMENT PLANT, (THANE-BELAPUR) ASSOCIATION, [2010 ] 328 ITR 0362 (BOM.), HELD THAT INTEREST EARNED BY THE ASSESSEE ON FIXED DEPOSIT AND OTHER DEPOSITS AND ON INCOME TAX REFUNDS WAS TAXABLE AS THIS INCOM E WOULD NOT POSSES THE CHARACTER OF MUTUALITY AS IN CASE OF SURPLUS FUND D ERIVED BY THE ASSESSEE FROM CONTRIBUTION OF ITS MEMBERS. RESPECTFULLY FOLL OWING THE SAME, WE DISMISS THIS GROUND OF THE ASSESSEE. 16. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. 17. TO SUM UP, REVENUES APPEAL IS DISMISSED AND ASSESS EES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCTOBER 2011 SD/- VIJAY PAL RAO JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 21 ST OCTOBER 2011 M/S. HILL PROPERTIES LTD. ITA NO. 6381/MUM./2010 ITA NO. 6093/MUM./2010 6 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, H BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI DATE INITIAL 1. DRAFT DICTATED ON 17.10.2011 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 18.10.2011 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 18.10.2011 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 18.10.2011 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 18.10.2011 SR.PS 6. DATE OF PRONOUNCEMENT 21.10.2011 SR.PS 7. FILE SENT TO THE BENCH CLERK 21.10.2011 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER M/S. HILL PROPERTIES LTD. ITA NO. 6381/MUM./2010 ITA NO. 6093/MUM./2010 7